Should You Challenge Your Property Tax Assessment in New Jersey?

As in most states, New Jersey homeowners must pay property tax each year to the local taxing authorities. The tax is due in quarterly installments on February 1, May 1, August 1, and November 1.

Opening your tax bill (sometimes known as an "assessment") can be a cause for shock, if not outrage. By learning how property taxes are computed in New Jersey, however, you can investigate whether the assessed value of your home is too high and the basis of an excessive property tax bill. In some situations, you might even be able to challenge the assessment and lower your bill.

This article gives an overview of the tax assessment process in New Jersey. It will help you determine whether the taxable value of your home is higher than it should be. If so, there are measures you can take to have that value reduced.

Note, however, that the process can be complicated, and depends a lot on your specific property and county. Thus, you might wish to use this article to spark further investigation, including having conversations with local tax professionals.

How Your New Jersey Tax Bill Is Calculated

In New Jersey, two factors determine your tax bill: first, the taxable value of your home, and second, the applicable tax rate (that is, the percentage of the taxable value that the local tax authorities use to compute your property tax).

Let's examine how these two factors work together to determine your total bill.

The process starts when the municipal tax assessor determines your home's taxable value. In New Jersey, the taxable value of a home is ordinarily 100% of its "true value," which is essentially what the home would sell for on the open market. Your county tax board can adjust this percentage figure, which is also known as the assessment ratio.

The taxing authorities multiply the taxable value of a home by the tax rate to arrive at the tax owed. Imagine that the taxable value of your home is $300,000 and the tax rate is $10 for every $1,000 of taxable value. Your property tax for the year will be $3,000 (300 x $10 = $3,000).

Local officials set the tax rate, so the rate varies depending on where you live (for instance, in Bergen County versus Somerset County). You unfortunately cannot do much about the tax rate, except to vote wisely for the elected officials who determine it and carefully consider revenue issues that appear on the ballot.

But you may have some influence on the taxable value of your home. If the taxable value assigned to it is too high, you might be able to get it reduced, and thus save a bundle in property tax. Even just a $500 reduction in your annual tax bill would add up to $5,000 in savings over a ten-year period. Not bad!

Consider this example: Matthew and Catherine own a home in New Jersey. The tax assessor has given it a taxable value of $400,000. The local tax rate is $10 for every $1,000 of taxable value. This makes their annual property tax $4,000. After some research, the couple concludes that, based on recent sales of comparable homes, the taxable value of their home should be $350,000. They successfully appeal their assessment to the local taxing authority. Now, their tax bill is $3,500 a year instead of $4,000.

In most New Jersey communities, you can get contact information for your tax assessor by phoning your municipal government office. Many municipalities post contact information online. Find yours at the official New Jersey State website. In Gloucester County, the County handles property tax assessments as part of a pilot program; call 856-307-6445.

How to Check the Official Tax Record for Your Home

You may wonder how, exactly, you can convince the tax assessor that your home is worth less than they think it is. The tax record for your home may contain inaccurate or incomplete information that leads the tax assessor to place too high a value on it. You can get a copy of the tax record at the tax assessor's office. Or, your municipality might make your assessment record available online.

Review the tax record for errors. Be especially sure to check the following:

• Is your home correctly classified as residential property?
• Is the size of your home and the lot it sits on correctly stated?
• Does the record accurately list the number of bedrooms and bathrooms?
• Does the record list improvements that were not actually made?
• Are defects in your home, such as a leaky basement or an aging roof, mentioned?
• Is the age of your home accurately stated?
• Is the purchase price accurate?
• Does the record give you the benefit of all the tax breaks that you may qualify for, such as those that may apply based on your income, age, disability, or military service?

If there is wrong or incomplete information on the records, let the tax assessor know so that the record can be corrected and the taxable value adjusted. But even if the tax record is accurate, you might disagree with the tax assessor's conclusion regarding the market value of your home. In that case, you will need to do more.

Gather Information About Whether Your Home Has Been Fairly Valued

Two types of information can help you establish that the tax assessor has placed too high a taxable value on your home. The first (and most important) factor is how the assessor has treated homes similar to yours in the local area. The second is how much homes like yours are currently selling for, again focused on the local area.

Taxable Values of Similar Homes

Review the assessment records for homes in your community that resemble your own. You will find those records at the tax assessor's office. Finding comparable homes will take time and effort, but can be worth it if you believe that your home is truly over-valued. Try to find homes that have approximately the same square footage as yours and, preferably, are located in the same neighborhood or a nearby one. If similar homes have a taxable value lower than yours, this is strong evidence that you're over-assessed.

Consider this example. Caitlin and Marcelo own a three-bedroom ranch-style home in a subdivision with many homes like theirs. The taxable value of their home is $375,000. They believe this amount is too high. They check the records for a dozen similar homes in their subdivision and discover that the average taxable value of those homes is $340,000. Moreover, most have finished basements, and Caitlin and Marcelo do not have this amenity. The couple now has good evidence for claiming that the taxable value of their home is too high.

Sale Prices of Similar Homes

If you bought your house recently, the price you paid is excellent evidence of its current value. Regardless of when you bought your home, you should gather information about recent sales prices of similar homes in your community. Finding these sales prices may take some doing. For advice on gathering this kind of evidence, see Listing Your House: What List Price Should You Set? Some online resources such as Zillow can also be useful.

Try to avoid transactions in which the buyer has purchased a home from a relative, or at a foreclosure or property tax sale. The sales prices in such transactions may be artificially low and won't be convincing evidence of true market value.

You can also consider asking an experienced real estate broker to give you information about recent home sales in your area. You might need to pay a modest fee for such assistance. If the stakes are high, you can hire a private appraiser to gather the information and provide a written report, though this will be more expensive. A local lender or real estate broker might be able to recommend a qualified appraiser. If not, explore the Appraisal Institute website, which allows you to search for a professional assessor by zip code.

Note that if you recently refinanced your home or took out a home equity loan, the lender probably ordered a professional appraisal. Obtain a copy of it. It may give you powerful ammunition in your quest for a reduced taxable value.

Next Steps

After investigating the taxable value of your home, you might conclude that the number set by the assessor is too high. Contact your local taxing authority to find out what measures you can take to reduce the home's taxable value.